Pages

Tuesday, 17 November 2015

BUHARI AND THE ECONOMY

President Muhammadu Buhari

President
Muhammadu Buhari would
want Nigerians believe that his attention to the economy is total as he said
the other day that he “cannot be distracted” from his “efforts to salvage and
revamp the national economy.” Hence his various trips this year to London,
Washington D.C., Paris and New Delhi. Relatedly, the administration has signed
an assistance agreement with the United
States Agency for International Development (USAID) while several foreign
delegations have visited in prompt response to what appears to be the
President’s alms bowl economic revival strategy.

The recent statement by
President Muhammadu Buhari’s media adviser in response to the opposition
party’s expressed displeasure over the handling of the economy thus far,
however, portrays the President as the haughty know-it-all. It is the very
mindset of the political leaderships before him that over the years “cannot be
distracted” and was not “prepared to listen” to the supposedly not “serious
matters” deemed to emanate from other Nigerians.

In the past 14 years, that
self-deluding mindset led successive federal administrations not to listen to
the painless solution to the national economic pain, which the President’s
approach so far will make worse. Buhari should, therefore, stop lamenting the
past and desist from doing so in foreign countries. And importantly, the
Nigerian people deserve to know firsthand the President’s economic vision for
the country before it is implemented.

Meanwhile, it is necessary
to put the main issue raised in the statement in proper perspective. The
plundering of the national treasury for personal gain by the entire political
leadership dates back to at least the 1980s. The rape and mismanagement of the
economy were advanced as the major reasons for the coup on December 31, 1983,
which made Buhari Military Head of State. It is a blessing in disguise that
sharp drop in crude oil prices and oil proceeds has exposed the stark economic
reality. And the gospel truth: all economic problems besetting the country
including heinous corruption were made possible by the decades-long flawed
fiscal and monetary policy framework, the destructive factor which received no
mention in the exchanged statements between the opposition PDP and the
President.

When the verbiage and
tasteless post-election mudslinging are sheared from the substance of
“salvaging and revamping the national economy”, Buhari and his opponents are in
agreement as both sides look up to foreign investment to drive national
economic recovery. Sadly, they have merely refused to listen to history as
well. Nigerians should not allow 45 years of self-inflicted economic
under-performance to be repeated. Available data credited to the IMF/World Bank
show that over the 43 years up to 2013, the value of foreign direct investment
(FDI) net inflow in Nigeria as a proportion of (not contribution to) GDP ranged
from minus 1.15 per cent in 1980 to 10.83 per cent in 1994.

Under Buhari in 1984, the
indicator was 0.66 per cent (current US$189.2 million). From 1999 to 2013,
despite the purported seductive packaging and marketing of the economy by the
PDP administrations, the indicator ranged from 1.07 per cent (current US$5.6
billion) in 2013 to 5.5 per cent (current US$8.6 billion) in 2009. Compare and
contrast the value of FDI and its other aspects with the yearly remittances to
the country (it has steadily risen to $20 billion annually) by Nigerians in the
Diaspora and it is obvious that the importance of FDI has been overrated. On
the other hand, will Buhari’s pledge to remain true to plain-speaking by parading
the stunted and kwashiorkor-like distortions of the economy before foreign
investors in their home countries bring in the expected huge finances for
development? FDI is not charity: foreign investors are hardnosed businessmen
that are wont to create banana republics for wholesale exploitation.

Therefore, before he jets
out to the capital of another successful economy for alms, Buhari should savour
the meat of the TICAD Asia-Africa Trade and Investment Conference in Tokyo in
November 2004, which is hopefully preserved in the Aso Villa Library. In his
opening address to the conference, then Japanese Prime Minister, Junichiro Koizunmi, said: “In the last half century, Asia achieved unprecedented
economic growth which was once dubbed the East Asian Miracle. In fact, this was
not a miracle but the fruit of tireless efforts by the Asian people. The
purpose of Africa-Asia cooperation is to share and make use of the experiences
for African development.”

He asserted that
government’s role is to provide the conditions for the private sector to invest
and create employment, trade and grow the economy and in the process remove
poverty.

What is the lesson therein
for Nigeria, which has been gathering dust for 11 years? In the world’s
successful economies, domestic bank credit fuels the various economic sectors.
For example, domestic bank credit disbursements to economic agents as a
proportion of GDP exceeds 300 per cent and 200 per cent in Japan and USA
respectively. For Nigeria, it was only 20 per cent in 2013. Yet the private
sector deposit base in Nigerian banks (excluding public sector deposits that
have finally and rightly been sequestered in the Treasury Single Account) is
enough to raise the indicator to more than 70 per cent of GDP.

And so, the Federal and
State Governments have clung to unpatriotic policy measures meant to perpetuate
corrupt self-enrichment of the political elite while rendering uninvestable
behind prohibitive interest rates domestic bank credit capacity proportionally
in excess of 50 per cent of GDP to the disadvantage of the national economy but
simultaneously to the benefit of foreign economies where they go to contract
foreign loans and beg for FDI. It does not make a rational economic choice for
the Buhari administration to pin hope for economic recovery and national
prosperity on FDI when the FDI indicator since 1999 has been a negligible 5.5
per cent of GDP or less annually relative to expandable domestic finances
currently exceeding 50 per cent of GDP but which deliberate federal policies
have rendered inaccessible.

The flawed handling of
Federation Account oil proceeds and the attendant response with tight and
contractionary monetary policy stance are to blame for not only the above
oddities but also the accumulation of humongous non-investable national
domestic debt for the unmerited enrichment of banks, preying foreign portfolio
investors and few individuals, among other problems. Unless and until President
Buhari directs the CBN to implement across the board its proposal on August 14,
2007 to reverse the improper treatment of Federation Account dollar
allocations, which was arbitrarily overruled, the economy will remain in the
woods. And pending that directive, any presidential orders such as stopping
further naira devaluation is inconsistent as it will not stem naira depreciation
with associated compounding economic distortions. That order may be likened to
attempting to stop black smoke rising from a kitchen where damp faggot is being
burnt to cook.

Having already sat out
nearly six months of his four-year mandate, President Muhammadu Buhari should
now hurry and embrace sound economic policies in full awareness of the normally
lagged economic outcomes. (guardian)

TECTONO

Tectono Business Review is the most sought after business consultants, researchers and publishers by business tycoons, top politicians, heads of federal parastatals, and top managers of blue-chip companies.